Papua New Guinea’s push for greater sway over its own mineral wealth scored a win, with Barrick Gold agreeing to a deal that will see the South Pacific nation get a big stake in a key gold mine.
Barrick will give Papua New Guinea a “major share” of the Porgera mine, the country’s Prime Minister James Marape said Thursday in a joint statement with the Toronto-based miner. In exchange, Barrick can re-open and keep operating the facility, which had been suspended after the government didn’t extend its mining lease in April, and there would be a “fair sharing” of the economic benefits.
The in-principle agreement follows a months-long showdown that escalated to legal challenges and tested Marape’s pledge to obtain a greater share of Papua New Guinea’s resources wealth. It echoes similar drives by other commodities-rich nations, including Indonesia, to direct more revenues to state coffers.
“I look forward to hearing of the outcomes of further discussions on the economic principles to guide future mining operations,” Marape said after talks in Port Moresby with Barrick’s Chief Executive Officer Mark Bristow.
Marape swept to power last year with a pledge to increase the state’s share of wealth from the production and export of materials. He also criticized previous deals, and is pursuing energy giant Exxon Mobil Corp. for better terms on a gas investment.
Barrick’s Bristow said in a separate email Thursday that there had been “progress to an amicable set of agreements, but there is still some way to go until a binding agreement on a way forward is reached.”
Bristow reiterated at a virtual conference Friday that the two sides were “a long way off in reaching an agreement.” In terms of what a deal would look like, he said Barrick’s position has been that economic benefits should be shared roughly equally.
“I’ve always been of the view that a partnership is 50-50,” Bristow said at the FT Commodities Mining Summit. “That’s the basis on which we’ve engaged with the Papua New Guinea government and the prime minister.”
Porgera is a joint venture with Zijin Mining Group Co., whose Hong Kong-listed shares advanced 1.6% on Friday. Barrick shares slipped 0.3% as of 10:11 a.m. in Toronto.
In April, Bristow accused PNG of “nationalization without due process” when the government declined to extend its license to operate Porgera. Barrick shut the mine accounting for 5% of its 2019 gold output, before launching legal proceedings against the government.
Marape has previously said the government only exercised its rights under PNG law to reclaim the lease after 30 years and that all assets at the site remained Barrick’s.
Resource nationalism has presented a growing challenge for energy and mining groups. In Indonesia, Barrick rival Freeport-McMoRan Inc. handed control of one of the world’s biggest copper mines to a state-owned firm after a two-year tussle ended in late 2018.
Barrick previously said that with proper investment Porgera has the potential to become a top global asset. The company was forced to cut its 2020 production guidance in May by 200,000 ounces as a result of the stand-off.
Barrick has left behind a high-level team to advance negotiations, and the prime minister and Bristow agreed to meet again in the coming weeks once negotiations conclude, according to the joint statement.
“I have full confidence that we will be able to broker an historic agreement that will provide a lasting legacy and enduring partnership that will benefit our nation for many years to come,” Marape said in Thursday’s statement.